Haranga Resources is raising $6 million through a strategic placement of shares to a Mongolian investment group to complete the process of obtaining a mining license at the Selenge iron project in Mongolia.
Proceeds will also be used to complete a feasibility study on a full scale mine and an associated wet magnetic separation plant.
Upon the grant of the license, the funds should also enable the start of small scale mining in certain higher grade zones that can be beneficiated via simple dry magnetic separation.
The funds were raised through a placement of 30 million new shares priced at $0.20 each to a group of Mongolian investors, led by businessman Amarbaatar Chultem.
This represents an 8% premium to the company’s last closing price of $0.185 on 4 January 2012 and a 31% premium to the one month VWAP.
It also includes the issue of 15 million options exercisable at $0.20.
On completion, this new Mongolian investor group, which are clients of Haranga’s corporate advisors Garrison Capital, will hold a combined 12.41% of the Company’s expanded share capital on an undiluted basis.
Haranga has a 80% interest in Selenge, where it successfully conducted a major drill program in 2012 and expects an enlarged resource in April 2013.
Selenge comprises four major iron ore prospects within 10 kilometres of each other, and is strategically located near to the 304 million tonne Eruu Gol mine, which currently exports over 3 million tonnes of magnetite concentrate per annum.
With the additional funds, the company’s cash position will increase to $9.4 million.